Has Amazon Hit Its Prime?

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Twenty years. 

Twenty years ago, Bill Clinton was president and the the World Trade Organization was formed. eBay went live. The Internet, as we know it today, was still the World Wide Web and was more a “thing” that other people used. No one really knew how it was going to change the world, change the way money moves around the globe and change how commerce is conducted.

Twenty years in the payments and commerce space is a milestone worth marking. And Amazon has earned that right today on its 20th birthday.

In the fly-by-night type of financial startups that come and go, there are not always as many success stories that companies like Amazon have produced. Sure, it’s had its share of flubs (like the Fire Phone flop), and there’s been plenty of quarters that have miffed investors when Amazon failed to make a profit, despite its billions in sales. It’s taken gambles that didn’t pan out and it’s had to fight for its reputation when analysts slander it on rough quarters that were dubbed “investment periods.“

But it’s also one of the biggest retailers in the world, and the one word that can simultaneously strike fear into the hearts of retailers at the same time it moves volumes of their merchandise.

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So how did Amazon grow from the little online bookseller to the behemoth it has become today that sells almost anything consumers need to get their hands on? Items that, in some cities, can be delivered in under an hour. Where did that transformation begin?

Well, let’s go back to 1995 to when Amazon.com launched in July and sold its first book. Let’s not forget that Jeff Bezos wants to originally name it Cadabra (after abracadabra), but that concept was later squashed when his attorney thought it sounded like cadaver.

By 1997 Amazon announced its IPO and started trading under AMZN at $18/share. It wasn’t long after when Amazon.com marked its first milestone: the first Internet retailer to secure 1 million customers. By October 1998, Amazon went International and launched in the U.K and Germany. Since then, Amazon has grown its presence into 200 countries and has racked up more than 244 million active users. And by active, we mean active. Amazon gets about 175 million visits every single day.

Before the turn of the millennium, Amazon had patented its “one-click” feature that eventually would become one of its most important features to making the checkout experience more seamless. And during 1999 it was when Amazon expanded its marketplace into many of the goods seen today with the addition of toys, electronics, tools and hardware.

The clock turned and 2000 hit. It was this year that Amazon Marketplace launched. Amazon also introduced its free shipping threshold (over $100). A year later in 2001, Amazon rolled out in-store pick-up where it began to connect its clicks to bricks. And by the start of 2002, Amazon produced something they didn’t manage to produce even last quarter: a profit. Its first quarterly profit.

But it was also in 2002 when Amazon realized it needed to knock its free shipping threshold down a peg and it dropped to $25 (later upped to $35). And three years later, Amazon launched what has been called by one analyst as Amazon’s “crown jewel.”

Amazon Prime. That launched in 2005 — 10 years ago.

By 2005, those early shareholders were looking pretty good. As pointed out in an article from The Seattle Times from July 2005, someone who purchased 100 shares of Amazon (for $1,800) when it went public would have had a 2,100 percent return on their investment, ringing in at almost $40,000.

“I don’t believe there could be another Amazon,” Forrester Research analyst Carrie Johnson said in an interview in 2005. “There is very little patience for losses — for as long as Amazon incurred them. We’re just living in a different time, frankly.”

Oh, how the tables have turned 10 years later.

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But really? Can there be another Amazon? There are lots of wannabes and many have tried. Jet.com is the latest to throw its hat into the ring and it will launch next week (July 21). Interestingly, it is founded by a former Amazon employee – Marc Lore, who was previously the COO of Wizkids, and before that made his name as the co-founder and CEO of The Pit (eBay alternative). 

Amazon Prime, many say, has transformed Amazon. What started as a $79 annual free shipping service has turned into a $99 annual subscription that includes free two-day shipping on eligible purchases. But it’s added streaming of movies, TV shows, and music, along with access to Amazon Cloud Drive, Prime Pantry, Prime Early Access, Amazon Elements (Amazon’s own line of products), among some other perks. Amazon Prime members are also prime drivers of sales for Amazon, driving $1,500 in sales each year, versus $625 for non-Prime members.

And recent research from Millward Brown Digital shows that Amazon’s Prime customers are converting on purchases  on Amazon.com 74 percent of the time (22 times higher than the typical eCommerce conversion rate in the U.S.).

Amazon has also made its share of acquisitions.

Like in 2009 when Amazon made one of its biggest acquisitions: Zappos.com for $1.2 billion. And in that same year Amazon launched its first Local Express Delivery — a program that’s rapidly expanded today. Amazon first got into groceries in July 2006 — the same year it launched Amazon Connect.

Then, over the next series of years, Amazon made some other big acquisitions (and had some stellar quarters along the way). It was in October of 2011 that Amazon had a milestone quarter in terms of sales growth — reaching $10.88 billion (a whopping 44 percent growth from the year prior). It’s worth noting that during that same year Amazon launches Prime Instant Video, Amazon Cloud Drive, Amazon Deals App and Amazon Local.

And 2012 brought about more acquisitions: Kiva Systems for $775 million. That was its biggest acquisition since Zappos. Kiva Systems is a maker of robots that move items around warehouses, and it was estimated that in 2014, Amazon has 1,000 robots operating across its 89 warehouses.

But jump ahead two years to 2014 and you’ve got what may eventually go down in Amazon’s book of biggest mistakes — the Amazon Fire Phone. In July of 2014 the phone launched, but it turns out the consumer market just wasn’t into the Fire Phone. During Amazon’s Q3 earnings of that year, Amazon was left defending how it would handle having $83 million in inventory of a phone that no one seemed to want (Amazon spent about $170 million to stock and get sold).

And then we’re back at present day. The year when Amazon got its hand into the Internet of Things phenomenon with Amazon Dash and launched Amazon Echo to serve as the personal assistant to its tech-savvy customers. Amazon has spent the year growing its physical storefront, growing its warehouse space, creating its destinations travel marketplace, adding more one or two-hour delivery markets, expanding its Amazon Fresh offerings and convincing the FAA on its delivery drone plan.

That’s just halfway through the year.

For now, it appears, Amazon has just entered their Prime.

Happy Birthday, Amazon. What will the next 20 years bring?

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